The Progressive Policy Institute (!) criticizes a provision almost snuck into the health-care bill that would have been a windfall for trial lawyers at the expense of the rest of us. Earlier and earlier on Overlawyered, which was the first to publicize the provision.

A friend points out a little nugget of absurdity and political mendacity in the Pelosi health-care bill. Remember Obama’s effort to try a “test” for tort reform? (We don’t actually need a test, since it has worked to lower medical malpractice coverage and help increase access to doctors in states that have tried it.) Well, Pelosi’s bill has an anti-tort-reform measure. On pages 1431-1433 of the 1990-page spellbinder, there is a financial incentive for states to try “alternative medical liability laws.” But look — you don’t get the incentive if you have a law that would “limit attorneys’ fees or impose caps on damages.”

In other words, Congress is providing a financial incentive to uncap damages. Marvelous.

One can certainly see why ending tax deductions for punitive damages is a superficially appealing idea.

But the main effect will be to increase settlement pressure in cases where there are unjust punitive damages awards. Because settlements can be characterized as “compensatory” and tax-deductible while court-ordered judgments cannot, trial lawyers will be able to use the tax differential to discourage defendants from seeking appellate review. So one cannot expect very much tax revenue from this: “punitive damages” will drop precipitously, but money going to trial lawyers will go up. Moreover, appellate courts will have fewer opportunities to correct bad decisions by trial courts, creating more uncertainty in litigation, which raises litigation expenses because it will be harder to predict outcomes.

Note that taxpayers are not subsidizing punitive damages award deductions by businesses: the income “lost” because a defendant deducted the punitive damages award will be income realized by the plaintiff and his or her attorney. If the deduction is forbidden, the government will be, in effect, double-taxing the same money.

The Obama administration makes much of its claim of being pragmatic, rather than ideological, but this looks like an indirect giveaway to the trial bar rather than a source of government revenue. More: Walter at Point of Law; and my shining mug quoted at the Southeast Texas Record.

Can anyone have seriously imagined that a retired worker from Goodyear would rise to national prominence over a case she lost at the U.S. Supreme Court regarding statute of limitations? And yet, at tonight’s Democratic National Convention, Lilly Ledbetter will take center stage for a few minutes.

What’s missing from the debate about the bill, unfortunately, is a discussion about what the bill is about and should be about. It’s not really about pay equity — after all, we already have the Equal Pay Act for that. It’s really about allowing indivdiuals to recover much more in the way of damages than they could otherwise recover (though you’d be hard-pressed to make heads or tails of it from the seemingly technical language used). And frankly, there’s nothing wrong with advancing that goal if there was a fair debate on the merits.

But unfortunately, the public debate on the bill seems to fall into the classic stereotypes that each side rolls out with a piece of new legislation. Proponents of the bill suggest that those who are for the bill are FOR pay equity, and those opposing the bill are AGAINST pay equity, which is just hyperbole. Opponents of the bill have used hyperbole of their own, ignoring the fact that corporations have had to comply with the Equal Pay Act for years and that many are well-suited to address such claims.

It’s hard to see how some changes will have any real impact on employers. For instance, one part changes the language regarding a “factor other than sex” defense that an employer can raise to a “bona fide factor other than sex”. While one can debate the theorhetical differences in language, the real-world effect of the change is probably minimal for employers. After all, do employers really make salary decisions and think “well, I can explain the differences with reason, but is it a ‘bona fide’ reason”? And small businesses will be excluded from the act, in the same way that they are excluded from coverage under the Fair Labor Standards Act.

On the other hand, proponents of the bill gloss over the fact that removing some caps on compensatory and punitive damages — as the bill proposes — could have a significant effect on employers and the likelihood of lawsuits (one need only look at the rise of Title VII litigation after the Civil Rights Act of 1991 was passed for a historical perspective).

Proponents also ignore the fact that the punitive damages portion of the bill would mark a change in philosophy regarding punitive damages (to see the changes in context, click here). For example, one change would allow punitive damages to be awarded even when no intentional discrimination has been proved — which contradicts the traditional notion that punitive damages should be issued to punish the defendant for some type of malice or reckless behavior.

The political reality is that some version of this bill is going to get passed and employers need to keep a watchful eye on the bill. We’ll see in the upcoming weeks whether a compromise is eventually fashioned (much like the compromise being done for the ADA Amendments Act of 2008) or whether this is just political posturing in an election year. Either way, here’s (perhaps foolishly) hoping that the debate on the bill’s merits gets more substantive than just slogans.

(At Point of Law, Walter Olson’s other site, Carter Wood provides his insights into tonight’s happenings as well.)

Daniel Fisher usually understands legal issues and has done some good reporting about trial-lawyer abuses, so I was very disappointed in today’s Forbes.com story (which quotes me about Obama and CAFA). Most notably, it’s not true that tort reform is a “catchall phrase for legislative measures designed to make it harder for individuals to sue businesses”–many tort reforms make it easier for individuals with legitimate claims to sue businesses. Tort reforms are simply measures to improve the accuracy and efficiency of the civil justice system; they’re opposed by trial lawyers because they derive billions of dollars of wealth from inaccuracies and inefficiencies in the civil justice system, and supported by businesses and consumers that are the victims of such inaccuracies and inefficiencies.

The article also inaccurately characterizes the Obama-Clinton medical malpractice legislation, and furthers the idea of “Kennedy is a moderate,” blurring the role of the Supreme Court by implicitly endorsing the liberal idea of it as a political superlegislature rather than a judicial body with an obligation to follow the law. The focus on anti-preemption legislation, as opposed to some of the dozens of other pro-trial-lawyer-lobby bills pending in this Congress and likely to be renewed next Congress, is unusual. (Separately, I disagree with Jim Copland; I don’t think McCain would hesitate to veto the giveaways to the trial-lawyer lobby if they’re in single-purpose bills and not attached as hidden amendments to omnibus legislation.)

I’m less surprised than Fisher and Bill Childs that Obama is getting money from defense firms, or, more accurately, attorneys who work at defense firms. The legal establishment is overwhelmingly liberal (hence the 3:1 fundraising advantage Obama has), and many defense attorneys are perfectly happy with a status quo that requires companies to pay them millions of dollars to continue doing business. (Some are too happy, and have vocally supported ABA resolutions that would harm their clients–something their clients should pay closer attention to.)

While plaintiffs’ law firm contributions are often coordinated (sometimes a bit illegally, as when Tab Turner’s firm and Geoffrey Fieger’s firm were caught reimbursing their employees for donating to John Edwards), it’s a mistake to think the same thing happens in the defense bar, where attorneys are donating on an individual basis because they perceive future government administration (or Article III) jobs of a certain political caliber as pay-to-play or because they’re otherwise simply interested in the political process. Kirkland & Ellis may have tobacco and asbestos defense in its portfolio, and many alumni in the Bush administration, but most Kirkland attorneys are doing other things, and a disproportionate number of them at the Chicago-based firm are going to be former classmates of or students of Harvard Law graduate and Chicago Law lecturer Obama, and have the six- and seven-digit incomes to give maximum contributions–and it only takes a few dozen $4600 contributions to make a firm look like a big contributor. (And, on the other hand, as if to demonstrate the bipartisan nature of most law firms, John McCain turned to a Republican attorney, former Reagan White House Counsel A.B. Culvahouse, at the largely Democratic O’Melveny & Myers to lead his vice presidential search.) During the primaries, the trial lawyers were giving most of their money to Edwards, Clinton, and Biden, but those fundraisers are now doing business with Obama, as the recent press coverage of Fred Baron shows.

But the article is correct that the outlook for federal tort reform is grim, and that reformers are looking at rearguard actions defending against numerous attempts to make the system worse.

I’m quoted by Quin Hillyer in an Examiner story today about the dozens of bills pending in Congress that engage in tort deform–favors for the trial bar. The new Trial Lawyer Earmarks website does a marvelous job documenting most of the bills out there, though one wishes it would provide direct links to THOMAS rather than forcing one to engage in separate searches. (Mislink and misspelling corrected.)